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Category Archives: Asia-Pacific

GIC RE, an arm of the Government of Singapore’s real-estate-investment corporation, will acquire the assets of luxury hotel owner MSR Resort Golf Course after a bankruptcy court auction failed to generate any competing bids.

GIC will pay its stalking-horse offer of $1.5004 billion, plus up to $123.7 million to cover a settlement over the rejection of management agreements reached between MSR and Hilton, court records show.

MSR was set to hold an auction for its assets on Dec. 5, but the company said in court filings that it did not receive any qualified competing bids by a Dec. 3 deadline. GIC has been attempting to purchase MSR’s assets since at least 2010. GIC made multiple offers in the early stages of MSR’s Chapter 11, starting in February 2011, which MSR repeatedly rejected. MSR said it sought an equity sale rather than an asset sale in order to “avoid triggering unnecessary tax liability.”

According to an amended Chapter 11 plan and disclosure statement filed with the court on Dec. 11, MSR said the GIC transaction “will likely result in a significant tax liability against non-debtor MSR Resorts and debtor MSR Resort Sub Intermediate Mezz LLC that those entities will likely be unable to satisfy. The debtors also recognize that in the case of debtor MSR Resort Sub Intermediate LLC, the debtors will likely be unable to confirm a plan of reorganization given the size of the resulting tax liability. Nonetheless, given that the alternative presently available, both in- and out-of-court, the debtors believe the plan is the best path forward to maximize stakeholder recoveries.”

Under the current plan, most MSR creditors are expected to recover in full, except for fourth-mezzanine loan holder Five Mile Capital, which will be wiped out.

MSR estimates the amount of the tax liability in light of the GIC purchase is at about $314 million for its REIT, and about $17 million for its non-REIT holdco – neither of which is expected to have the funds to satisfy those liabilities.

A hearing to approve the MSR’s disclosure statement is scheduled for Dec. 13, before U.S. Bankruptcy Judge Sean Lane, in Manhattan. Votes on the plan are now due by Jan. 8, in time for a Jan. 15 confirmation hearing. – John Bringardner

The implosion of Hawker Beechcraft’s proposed $1.8 billion sale to Chinese buyer Superior Aviation Beijing Co. – news welcomed by its unionized employees – is just one of several recent failed deals between U.S. and Chinese companies.

The deal blew up not because of price or any immediate legal impediment, according to sources familiar with the matter, but because of the complicated nature of the deal, much of which was related to the origin of the buyer. Not only was China besieged with harsh rhetoric from both sides during the second presidential debate, the U.S. has cracked down on some of Chinese-backed enterprises operating in the U.S., ostensibly chilling certain business relations between the two superpowers. Both labor concerns and the requirement that Superior sell Hawker’s defense business separately due to security restrictions may have created additional complexities in finalizing the deal, sources said, though there has been no explicit statement about what was the ultimate deciding factor.

Steve Miller, the turnaround specialist currently installed as Hawker’s CEO, said in a statement this week only that the transaction “could not be completed on terms acceptable to the company.” Further language in the release noted, “the parties could not reach agreement on the terms of a plan-sponsorship agreement.”

Union leverage
The company’s unions early on largely shaped the outcome of any Hawker restructuring deal. Hawker filed for Chapter 11 bankruptcy protection in May and announced in July that it was in exclusive talks with Superior regarding the purchase of the company’s non-defense division. But before Superior entered the picture, heated negotiations between Hawker and the International Association of Machinists and Aerospace Workers led to a pension plan modification that preserved members’ ability to retire under terms of the current defined benefit pension plan. When Superior and Hawker entered into an exclusive negotiating period, the details had not been finalized. Restructuring professionals not involved in the deal say there are not good comparable scenarios for Chinese buyers being able to come in and change labor agreements, which can often be a sticking point.

After the Superior deal was announced, IAM president Tom Buffenbarger made a public speech expressing the union’s desire to keep Hawker in the hands of U.S. owners.

When it was revealed yesterday the deal collapsed, IAM came out with a jubilant statement that no changes would be made to the company’s pension agreement. In the release, the IAM referred to the deal as “controversial” and called the head of Beijing-based Superior a “shadowy figure known as ‘China’s Helicopter King.”

The IAM appears to have gotten their wish, but at what expense? Hawker now intends to exit as a standalone company, more details of which it plans to file in court in the coming weeks. If Hawker cannot find a buyer, it is considering shutting down its jet business, according to the statement announcing the failed deal. Hawker said it instead will focus on making aircraft that use different technology such as, the “turboprop, piston, special mission and trainer/attack [models] – the company’s most profitable products – and on its high margin parts, maintenance, repairs and refurbishment businesses, all of which have high growth potential,” according to the statement.

How the term loan crumbles
Such uncertainty has demolished more than a fifth of the value of the term loan debt since before doubts started to creep in about the deal. The cov-lite TL was active yesterday, with bids hitting as low as 56, according to sources, and holders are still trying to figure out what it will be worth coming out of bankruptcy as a standalone company.

Hawker’s secured debt consists of a $1.42 billion term loan, $241.9 million on the revolver, and $38.9 million in a synthetic L/C strip. The four main holders of the term debt are Centerbridge Partners, Angelo, Gordon & Co., Sankaty Advisors, and Capital Research & Management. Private equity sponsors that are set to lose their existing equity stakes are GS Partners and Onex Partners.

Paper tigers?
As part of the conditions of the deal, Superior couldn’t buy Hawker’s defense business, Hawker Beechcraft Defense Co., because of security concerns. Superior is 60% owned by Beijing Superior Aviation Technology, an entity owned entirely by its chairman, Shenzong Cheng, and his wife, Qin Wang. The remaining 40% is owned by an entity controlled by the Beijing municipal government. Even so, the transaction was still going to need to be reviewed by the Treasury-led interagency Committee on Foreign Investment in the United States, or CFIUS.

Recently, this type of approval has become a more sensitive issue between the U.S. and China, with two rare examples of intervention by the U.S. government in business with Chinese companies: For one, last month, the White House blocked a plan by Chinese national-owned Ralls Corp. to build four wind farms near a U.S. Navy base, after CFIUS concluded it posed security risks. That company then went on to sue CFIUS and President Obama, according to court documents, with its CEO warning that the case would deter Chinese investment in the United States, according to news reports.

Then a recent report from the House Intelligence Committee brought up the issue of potential security issues with Chinese telecom Huawei, which installed gear to manage traffic on wireless networks in the U.S. The report noted the potential for spying through Huawei gear installed to manage traffic on wireless networks. The committee also criticized Huawei management for failing to provide details about its relationships with Chinese government agencies.

Wireless-broadband provider Clearwire’s 8.25% convertible notes are being quoted at 97/100 today, according to sources, on the official announcement that Softbank Corp. is taking control of Sprint Nextel. The return to par for these notes completes a remarkable recovery from deeply distressed territory for much of the year. The exchangeable notes due 2040, with $453.7 million outstanding as of June 30, were quoted at 73/75 just last week, rising to the 90 context on Friday on the unofficial takeover talk.

The notes were valued as low as 20 cents on the dollar in December.

Softbank, a Japanese bank, officially announced on Monday that it is buying a 70% stake in Sprint for about $20.1 billion, consisting of $12.1 billion to be paid to Sprint shareholders and $8 billion of new capital onto Sprint’s balance sheet.

Clearwire shares, trading on Nasdaq under the ticker CLWR, are up another 18% today at $2.73 as of 11:17 a.m. EDT, after hitting the highest level in over a year at $2.85 today, from $1.30 last week.

Clearwire debt had already seen recovery on news earlier this year when on Aug. 8, DISH mentioned in its 10-Q that it had invested $396 million in the debt of a single issuer that was eventually interpreted to be Clearwire. Clearwire’s bonds then shot up and have continued to post small gains on speculation that DISH would somehow partner with or purchase spectrum from Clearwire. The New York Post reported Friday that Sprint is also close to a deal with Dish Networks to buy a chunk of wireless spectrum. – Max Frumes

Japan’s Daikin Industries early today announced it agreed to acquire Goodman Global, a manufacturer of HVAC products, from Hellman & Friedman for $3.7 billion.

Market participants expect that Goodman Global’s loans will be repaid in connection with the transaction, which Daiken said is expected to close in the fourth quarter. Goodman Global had about $1.4 billion outstanding under its first-lien term loan and $175 million under its second-lien as of June 30, sources said.

Daikin develops, manufactures, sells and provides aftermarket support of HVAC equipment and systems, refrigerants and other chemicals, as well as oil hydraulic products. The company said it plans to finance the transaction through a combination of internally generated funds, public policy financing, straight bond issuances and bank loans.

At closing, that dividend recap was structured as a $1.5 billion, six-year first-lien term loan, which cleared the market at L+400, with a 1.75% LIBOR floor and a 98 offer price; a $275 million, seven-year second-lien term, which cleared at L+700, with a 2% floor and a 98 offer price; and a $250 million, five-year revolving credit. The first-lien term loan had been covered by a 101 soft call premium in the first year, while the call schedule on the second-lien is 103, 102, 101 in years 1-3, respectively. – Kerry Kantin

Crescent Credit Europe has announced three hires to its London-based team.

Steven Novick has joined the firm as managing director, head of Europe, Middle East, Africa and Asia Pacific investor relations and business development, while Benjamin Blumenschein and James Scott-Williams both join as senior associates.

Novick brings 18 years of investment banking and alternative-investment capital raising experience, and will lead the efforts to expand Crescent’s investor relationships in the EMEA and Asia Pacific regions, including sovereign wealth funds and other large institutional investors.

Prior to joining Crescent, Novick was responsible for global sovereign wealth fund coverage at Credit Suisse. Prior to that, he founded and led the Middle East sovereign wealth funds and financial sponsors group for Merrill Lynch.

Blumenschein joins the firm from Bank of America Merrill Lynch, where he was an associate in the global distressed/special situations group, while Scott-Williams was most recently an associate director in the corporate structured finance team at Royal Bank of Scotland.

Crescent Capital Group invests at all levels of the capital structure, with a focus on below-investment-grade debt securities through strategies that invest in senior bank loans, high-yield debt, mezzanine-debt and distressed-debt securities. – Staff reports

ShengdaTech filed a Chapter 11 plan and disclosure statement with the U.S. Bankruptcy Court in Nevada last week, aiming for plan confirmation at an Aug. 30 hearing in Reno.

The plan entails a wind-down of the company’s business and distribution of available assets to creditors, recovered by a liquidating trustee who will see through litigation the company has already initiated in China, where its former CEO was allegedly involved in accounting irregularities. So far, a special committee formed by ShengdaTech’s board has obtained control of three Chinese bank accounts held by the company’s Chinese subsidiary, Faith Bloom, with a combined balance of about $50,000. But as of Dec. 31, 2010, those accounts were supposed to contain about $73 million, according to the company’s disclosure statement.

Under the proposed plan, holders of about $173 million in general unsecured claims will receive a pro rata share of liquidating trust assets. Although the disclosure statement outlines numerous lawsuits filed in China and the continued efforts of the special committee, which could result in a recovery, the current estimated recovery on unsecured claims is close to zero. Noteholder securities claims, shareholders’ securities claims, and equity interests will only see a recovery if general unsecured claims are paid in full.

As LCD has reported, ShengdaTech is a Chinese manufacturer of nano precipitated calcium carbonate (NPCC) with a corporate registration in China. NPCC is a specialty additive used in a variety of products to enhance their durability and efficiency, widely used in paint, paper, plastic rubber, and PVC, according to the company. A special committee of the company’s board members filed for Chapter 11 in the U.S. on Aug. 19, 2011, seeking to halt its own CEO’s alleged interference with an internal investigation into accounting regularities (see “ShengdaTech board files for Ch. 11 to continue investigation of CEO,” LCD News, Aug. 22, 2011).

At the time of its filings, ShengdaTech listed total assets of $295.4 million versus total debt of $180.9 million, though the actual level of its assets remains in question as the investigation continues.

A hearing on the company’s disclosure statement is set for June 25, with objections due by June 15. A confirmation hearing has been proposed for Aug. 30. – John Bringardner

Bright Food of China is to buy a 60% stake in Weetabix, the U.K. breakfast-cereal maker owned by Lion Capital, in a deal that could trigger a repayment of the firm’s LBO loans that were extended just last year.

The acquisition gives Weetabix an enterprise value of £1.2 billion, including shares and debt. Lion and management will continue to hold the remaining 40% of the shares, and the deal is set to complete in the second half of 2012.

Rumours that Bright Food was looking to buy Weetabix first emerged last month, though these reports were initially denied. Weetabix has long been seen as either a sale or IPO candidate, even if no formal auction process was understood to be underway.

The sale comes after Weetabix agreed to extend its debt pile in November last year. At launch of the extension, Weetabix had £495 million of drawn first-lien debt outstanding, with the second-lien debt taking the total aggregate amount outstanding to £575 million. In addition, there are two PIK tranches, which totalled £130 million for the senior and £50 million for the junior at launch.

The takeover will trigger a change of control clause on these loans, though sources said some lenders may be willing to waive this given the popularity of the credit and Lion’s continuing involvement. Last month saw a strong uptick in European repayments, with €2.4 billion repaid out of the ELLI index, compared with just €300 million in March. New loan launches, in contrast, totalled just €1.38 billion, according to LCD data.

China’s Bright Food, however, is a company that generated revenue of $12.2 billion in 2011, to give EBITDA of $1.2 billion, and so has ample access to competitively priced loan financing. To support its acquisition of a controlling stake in Manassen Foods Australia last year, the firm signed a $315 million, three-year term loan paying an all-in fee of 210 bps, including a margin of L+170.

Northamptonshire-headquartered Weetabix exports to more than 80 countries, and its other cereal brands include Alpen. – David Cox

Cement manufacturer China Shanshui Cement Group completed an issue of unsecured notes. The company was the first industrial Chinese high-yield issuer to come to market since the first half of 2011. Bookrunners Credit Suisse, Deutsche Bank, HSBC, and J.P. Morgan placed the Reg S/144A notes after a slight delay related to ensuring that disclosure was satisfactory, following a full global roadshow in Hong Kong, Singapore, London, and the U.S., sources said. Proceeds will be used to refinance debt. The final order book totaled $1.6 billion spread over 180 accounts, with 58% of the bonds placed with investors in Asia, 30% placed with U.S. accounts, and 12% with European investors, sources said. Three-quarters of the issue was placed with fund managers, 12% with private banks, 7% with banks, and 6% with insurers. The new bonds are at 100/100.25 in the secondary market, sources said. The issuer’s outstanding 8.5% notes due 2016 were yielding 9.8% around the same time. Terms:

Chinese property development company Agile Property placed an issue of senior unsecured notes. The Reg S, registered bonds priced at the tight end of guidance of 9.9-10%, in firm market conditions, sources said. Bookrunners were HSBC, Standard Chartered Bank, and UBS. Of the final order book, which totaled roughly $6.25 billion, 82% of the deal was placed with investors in Asia, and 18% was placed in Europe, sources said. Notes are guaranteed by certain non-PRC subsidiaries. The company plans to use proceeds to finance land acquisitions, refinance debt, and fund general corporate purposes. Terms:

The appointment of Chan, who identifies structured securities potentially of interest to U.S. clients as well as funding opportunities for Asian corporates, represents an expansion of the firm’s existing platform.

Chan reports to Randy Li in New York, who heads the strategic credit group for Mizuho Securities USA, and Donal Galvin in Hong Kong, who is head of sales and trading for Mizuho Securities Asia. Chan joined Mizuho Securities USA in December 2011 from mCAPITAL, an investment manager specializing in distressed opportunities and restructurings, headed by Mark Devonshire, formerly of Merrill Lynch. – Abby Latour